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Banking on biometrics
FEATURE
Banking on biometrics The banking sector’s enthusiasm for biometrics may have been a little muted in the past, but with the current drive for innovation throughout the financial services industry, the technology is now looking much more attractive. If you talk to banks and payment organisations in Western Europe there is still only a limited appetite for biometrics. This is not a surprise given the investment they’ve been forced to make to keep up with rafts of legislation and industry initiatives such as the move to EMV Chip and PIN based-bank cards, the Single Euro Payments Area (SEPA) and faster payments. Even the move towards twofactor and three-factor authentication seems to have left them a little cold, with most banking organisations focusing more on security techniques such as PKI certificates, smart cards, USB tokens and handheld tokens. Instead, it is the banks in emerging economies which are embracing biometrics, making remarkable progress as they harness the technology to ensure banking security and convenience in often extreme conditions. And with the growing movement to improve services to the unbanked and underbanked, biometrics are proving their worth as an alternative to signatures and passwords in communities with relatively low levels of literacy.
Latin America Mexico-based Banco Azteca, which was launched in 2002 to target the 70% of the country’s population which is unbanked, has deployed a customer biometric identity system to more than 1,400 branches throughout Latin America. According to Michael J Redding, director of development at Accenture Technology Labs: “More than 8 million of its customers have registered for the system that allows the bank to combat identity theft and, as a result, offer banking opportunities to a broader demographic of the population.”
Digital Persona, supplier of the scheme’s biometric technology, claims it is the world’s largest biometric banking application. It says: “The technology enables 75% of Banco Azteca customers to establish and maintain savings and credit accounts for the first time, and it dramatically increases the bank’s potential customer base.” Biometrics were chosen as the most suitable technology because most of Banco Azteca’s customers are from low income communities without driving licences or some secure form of ID. In 2006, Digital Persona said that approximately 10,000 users were registering each day and that the system was processing an average of 200,000 fingerprint matches daily across Banco Azteca’s Latin American branch network. Brazil’s Banco Bradesco has also been getting in on the biometrics act. In 2006, it announced it was trialling PalmSecure – Fujitsu’s palm vein authentication technology – to verify customers using its ATMs. Initially, the trial was carried out internally, before moving to a wider customer rollout.
Middle East Although not an emerging economy, Israel has taken the lead in the Middle East, deploying dynamic signature verification in the banking environment, with organisations such as Bank Hapoalim using the technology. In the wider Middle East region, biometric ATMs are also being deployed. In 2006, Saudi Arabia’s Al Rajhi Bank contracted Diebold to supply and implement 82 biometric ATMs to distribute monthly retirement payments at social security offices throughout the kingdom. Diebold is managing the implementation of the biometric Opteva terminals and provides
overall development of the biometric software, including a customised user interface in the local language. Suliman Al Obaid, general manager of IT and shared services, Al Rajhi Bank, says the biometric programme may be expanded to include the enrolment of other customers in rural areas who are unfamiliar with the use of PINs.
Indian sub-continent There has also been a push towards the use of biometrics in the Indian banking sector. In December 2006, Citigroup revealed plans to roll out a network of biometric ATMs to serve low-income areas of the country. The machines will use thumbprints instead of PINs and will have colour-coded screen instructions and voiceovers to guide customers through transactions. According to reports, Citigroup has already installed one biometric ATM near a slum district of the country’s financial capital Mumbai, and another in one of its fastest developing cities, Hyderabad. It aims to expand the network to 25-35 machines over 18 months and will target a customer base of 50,000. Andhra Bank is also looking at rolling out biometric-based ATMs in Hyderabad. The bank’s chairman and managing director, K Ramakrishnan, says the bank plans to install as many as 150 biometric ATMs over the next fiscal year. He adds: “Our studies have revealed it is not just the rural/semi-urban branches where such biometric ATMs would be needed but even our customers in metro/urban centres have expressed interest in such machines.” Ramakrishnan says the bank is also focusing on mobile ATMs, which could double as mobile bank branches, thereby reaching more customers. Last year, Financial Software and Systems (FSS), which is based in Chennai (formerly known as Madras), announced the launch of its Biometric ATM Interface Solution (BAIS). This enables ATMs with biometric support to connect to Electronic Financial Transaction (EFT) switches. BAIS works with ATMs from vendors such as Diebold, NCR and Wincor-Nixdorf. FSS is also working on a similar solution with Vortex, a company specialising in rural ATMs with fingerprint verification. The introduction of biometric ATMs supports India’s Reserve Bank’s promotion 7
Biometric Technology Today • April 2007
FEATURE of financial inclusion by delivering banking services at affordable costs to the low income and disadvantaged groups. Such ATMs provide an easy way for bank customers to navigate their way through the banking process, particularly those with limited literacy skills, for whom further enhancements can be added, such as audio guidance in local languages. According to Nagaraj Mylandla, managing director of FSS: “Banks are looking at ways of enhancing micro financing and are taking the initiative on financial inclusion. ATMs with biometric support make it easier for people in rural areas to withdraw cash. Our new BAIS product fulfils the need of connectivity of ATMs with biometric support with banks’ online authorisation systems. Our new product will enable banks and ATM vendors to launch services to fulfil the needs of the recent government directives as well as banking initiatives.” The company adds: “All bank ATMs are networked and connect to a centralised computer (Switch), which verifies card transactions against the customer PIN and debits the customer account prior to dispensing cash. The fingerprint authentication method is non-PIN based, and this requires enhancements to the standard Switch environment. FSS’s BAIS meets this requirement, by performing requisite message translations as well as confirmation of authorisation.” In 2007, an AGS Infotech – Wincor Nixdorf Kisan biometric ATM was launched by Central Bank in the Indian state of Bihar. The machine, which recognises thumb impressions, was also designed for the conditions in rural India. It incorporates a video and voice animation system and a single-touch application to make it easier for farmers to withdraw money.
Back office Although customer-facing applications are grabbing the most media headlines,
biometric technology is continuing to be used for staffing functions. For example, the technology is being used behind the scenes in organisations such as India’s ICICI Bank, which has installed fingerprint scanning technology from SecuGen to authenticate network users at its treasury operations. Bank staff can authenticate themselves to a computer network by scanning their fingerprints with SecuGen’s Hamster III fingerprint readers. Secure Network Authentication Platform (Snap) software compares their fingerprints with previously registered scans in the server to verify their identities. If the prints match, staff can log in to the bank’s network. The bank reports there has been a 50% drop in calls to its helpdesk following the initial rollout of the system. “Qualitatively, security has improved, and we are one step closer to complying with the Sarbanes-Oxley regulation, which requires secure access to financial data, especially data that is vulnerable,” says Kartik Shah, senior manager at ICICI Bank. Africa has also announced a number of banking projects over the past couple of years. The South African Post Office is involved in a biometric system which is used to pay pension beneficiaries. According to its 2005/2006 financial report, the Post Office registered biometric recognition indicators for more than 217,000 pension beneficiaries, illustrating its growing role in conducting transactions on behalf of the state. Another notable project was last year’s launch in Nigeria of SmartSwitch, a multi-purpose biometric smart card that provides access to finance, insurance, loans, driving licences, pensions, health services and telephony.
Challenges One of the challenges for many emerging markets is the local climate, with extreme temperatures being a particular problem. Gareth Lodge, analyst, European Payments, at TowerGroup, says: “You’ve got to be sure
that what you’ve designed in northern Europe will work just as well in the desert conditions of other countries.” Many ATM manufacturers have their own solution to this challenge. For example, when necessary, Diebold equips its ATMs with its Extreme Environmental Kit, which incorporates an air conditioner in the ATM. Diebold says the kit extends the life of ATMs by allowing them to operate in regions with excessive hot and cold temperatures and reduces operating costs by eliminating the need to enclose the ATM in an air-conditioned building or kiosk. The kit also includes a terminal safe and enclosure protected by more than double the insulating properties of previous models, protecting the unit’s devices against rapid and significant temperature fluctuations. Another frequently cited challenge is the reliability of the power supply, particularly in rural areas where power cuts are frequent and can last for hours. This makes it difficult to replicate some biometric ATM systems beyond urban areas. “For so many modern payments operations we assume Internet connectivity and electricity,” says Redding. “In a lot of emerging economies, basic connectivity can be inconsistent and electricity can be unreliable. Because biometrics has a stronger dependency on a backbone infrastructure, there is a bias towards storing the biometric on a smart card, which is self-contained and enables a transaction to be localised. However, this involves a trust relationship because, although the transaction can be conducted locally, the merchant can’t verify it.” Although the use of biometrics for customer-facing activities in the banking sector is still not widespread, the number of contracts and deployments announced over the past couple of years is encouraging – particularly in markets that are playing technology leap frog. And while the challenges of power cuts and extreme temperatures will remain, companies are facing up to the issues and developing solutions that could help drive the use of banking services in emerging markets.
8 Biometric Technology Today • April 2007
Banking on biometrics The banking sector’s enthusiasm for biometrics may have been a little muted in the past, but with the current drive for innovation throughout the financial services industry, the technology is now looking much more attractive. If you talk to banks and payment organisations in Western Europe there is still only a limited appetite for biometrics. This is not a surprise given the investment they’ve been forced to make to keep up with rafts of legislation and industry initiatives such as the move to EMV Chip and PIN based-bank cards, the Single Euro Payments Area (SEPA) and faster payments. Even the move towards twofactor and three-factor authentication seems to have left them a little cold, with most banking organisations focusing more on security techniques such as PKI certificates, smart cards, USB tokens and handheld tokens. Instead, it is the banks in emerging economies which are embracing biometrics, making remarkable progress as they harness the technology to ensure banking security and convenience in often extreme conditions. And with the growing movement to improve services to the unbanked and underbanked, biometrics are proving their worth as an alternative to signatures and passwords in communities with relatively low levels of literacy.
Latin America Mexico-based Banco Azteca, which was launched in 2002 to target the 70% of the country’s population which is unbanked, has deployed a customer biometric identity system to more than 1,400 branches throughout Latin America. According to Michael J Redding, director of development at Accenture Technology Labs: “More than 8 million of its customers have registered for the system that allows the bank to combat identity theft and, as a result, offer banking opportunities to a broader demographic of the population.”
Digital Persona, supplier of the scheme’s biometric technology, claims it is the world’s largest biometric banking application. It says: “The technology enables 75% of Banco Azteca customers to establish and maintain savings and credit accounts for the first time, and it dramatically increases the bank’s potential customer base.” Biometrics were chosen as the most suitable technology because most of Banco Azteca’s customers are from low income communities without driving licences or some secure form of ID. In 2006, Digital Persona said that approximately 10,000 users were registering each day and that the system was processing an average of 200,000 fingerprint matches daily across Banco Azteca’s Latin American branch network. Brazil’s Banco Bradesco has also been getting in on the biometrics act. In 2006, it announced it was trialling PalmSecure – Fujitsu’s palm vein authentication technology – to verify customers using its ATMs. Initially, the trial was carried out internally, before moving to a wider customer rollout.
Middle East Although not an emerging economy, Israel has taken the lead in the Middle East, deploying dynamic signature verification in the banking environment, with organisations such as Bank Hapoalim using the technology. In the wider Middle East region, biometric ATMs are also being deployed. In 2006, Saudi Arabia’s Al Rajhi Bank contracted Diebold to supply and implement 82 biometric ATMs to distribute monthly retirement payments at social security offices throughout the kingdom. Diebold is managing the implementation of the biometric Opteva terminals and provides
overall development of the biometric software, including a customised user interface in the local language. Suliman Al Obaid, general manager of IT and shared services, Al Rajhi Bank, says the biometric programme may be expanded to include the enrolment of other customers in rural areas who are unfamiliar with the use of PINs.
Indian sub-continent There has also been a push towards the use of biometrics in the Indian banking sector. In December 2006, Citigroup revealed plans to roll out a network of biometric ATMs to serve low-income areas of the country. The machines will use thumbprints instead of PINs and will have colour-coded screen instructions and voiceovers to guide customers through transactions. According to reports, Citigroup has already installed one biometric ATM near a slum district of the country’s financial capital Mumbai, and another in one of its fastest developing cities, Hyderabad. It aims to expand the network to 25-35 machines over 18 months and will target a customer base of 50,000. Andhra Bank is also looking at rolling out biometric-based ATMs in Hyderabad. The bank’s chairman and managing director, K Ramakrishnan, says the bank plans to install as many as 150 biometric ATMs over the next fiscal year. He adds: “Our studies have revealed it is not just the rural/semi-urban branches where such biometric ATMs would be needed but even our customers in metro/urban centres have expressed interest in such machines.” Ramakrishnan says the bank is also focusing on mobile ATMs, which could double as mobile bank branches, thereby reaching more customers. Last year, Financial Software and Systems (FSS), which is based in Chennai (formerly known as Madras), announced the launch of its Biometric ATM Interface Solution (BAIS). This enables ATMs with biometric support to connect to Electronic Financial Transaction (EFT) switches. BAIS works with ATMs from vendors such as Diebold, NCR and Wincor-Nixdorf. FSS is also working on a similar solution with Vortex, a company specialising in rural ATMs with fingerprint verification. The introduction of biometric ATMs supports India’s Reserve Bank’s promotion 7
Biometric Technology Today • April 2007
FEATURE of financial inclusion by delivering banking services at affordable costs to the low income and disadvantaged groups. Such ATMs provide an easy way for bank customers to navigate their way through the banking process, particularly those with limited literacy skills, for whom further enhancements can be added, such as audio guidance in local languages. According to Nagaraj Mylandla, managing director of FSS: “Banks are looking at ways of enhancing micro financing and are taking the initiative on financial inclusion. ATMs with biometric support make it easier for people in rural areas to withdraw cash. Our new BAIS product fulfils the need of connectivity of ATMs with biometric support with banks’ online authorisation systems. Our new product will enable banks and ATM vendors to launch services to fulfil the needs of the recent government directives as well as banking initiatives.” The company adds: “All bank ATMs are networked and connect to a centralised computer (Switch), which verifies card transactions against the customer PIN and debits the customer account prior to dispensing cash. The fingerprint authentication method is non-PIN based, and this requires enhancements to the standard Switch environment. FSS’s BAIS meets this requirement, by performing requisite message translations as well as confirmation of authorisation.” In 2007, an AGS Infotech – Wincor Nixdorf Kisan biometric ATM was launched by Central Bank in the Indian state of Bihar. The machine, which recognises thumb impressions, was also designed for the conditions in rural India. It incorporates a video and voice animation system and a single-touch application to make it easier for farmers to withdraw money.
Back office Although customer-facing applications are grabbing the most media headlines,
biometric technology is continuing to be used for staffing functions. For example, the technology is being used behind the scenes in organisations such as India’s ICICI Bank, which has installed fingerprint scanning technology from SecuGen to authenticate network users at its treasury operations. Bank staff can authenticate themselves to a computer network by scanning their fingerprints with SecuGen’s Hamster III fingerprint readers. Secure Network Authentication Platform (Snap) software compares their fingerprints with previously registered scans in the server to verify their identities. If the prints match, staff can log in to the bank’s network. The bank reports there has been a 50% drop in calls to its helpdesk following the initial rollout of the system. “Qualitatively, security has improved, and we are one step closer to complying with the Sarbanes-Oxley regulation, which requires secure access to financial data, especially data that is vulnerable,” says Kartik Shah, senior manager at ICICI Bank. Africa has also announced a number of banking projects over the past couple of years. The South African Post Office is involved in a biometric system which is used to pay pension beneficiaries. According to its 2005/2006 financial report, the Post Office registered biometric recognition indicators for more than 217,000 pension beneficiaries, illustrating its growing role in conducting transactions on behalf of the state. Another notable project was last year’s launch in Nigeria of SmartSwitch, a multi-purpose biometric smart card that provides access to finance, insurance, loans, driving licences, pensions, health services and telephony.
Challenges One of the challenges for many emerging markets is the local climate, with extreme temperatures being a particular problem. Gareth Lodge, analyst, European Payments, at TowerGroup, says: “You’ve got to be sure
that what you’ve designed in northern Europe will work just as well in the desert conditions of other countries.” Many ATM manufacturers have their own solution to this challenge. For example, when necessary, Diebold equips its ATMs with its Extreme Environmental Kit, which incorporates an air conditioner in the ATM. Diebold says the kit extends the life of ATMs by allowing them to operate in regions with excessive hot and cold temperatures and reduces operating costs by eliminating the need to enclose the ATM in an air-conditioned building or kiosk. The kit also includes a terminal safe and enclosure protected by more than double the insulating properties of previous models, protecting the unit’s devices against rapid and significant temperature fluctuations. Another frequently cited challenge is the reliability of the power supply, particularly in rural areas where power cuts are frequent and can last for hours. This makes it difficult to replicate some biometric ATM systems beyond urban areas. “For so many modern payments operations we assume Internet connectivity and electricity,” says Redding. “In a lot of emerging economies, basic connectivity can be inconsistent and electricity can be unreliable. Because biometrics has a stronger dependency on a backbone infrastructure, there is a bias towards storing the biometric on a smart card, which is self-contained and enables a transaction to be localised. However, this involves a trust relationship because, although the transaction can be conducted locally, the merchant can’t verify it.” Although the use of biometrics for customer-facing activities in the banking sector is still not widespread, the number of contracts and deployments announced over the past couple of years is encouraging – particularly in markets that are playing technology leap frog. And while the challenges of power cuts and extreme temperatures will remain, companies are facing up to the issues and developing solutions that could help drive the use of banking services in emerging markets.
8 Biometric Technology Today • April 2007